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The Capital Levy in Theory and Practice

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  • Eichengreen, Barry

Abstract

This paper shows how in theory, if the contingencies in response to which it is imposed are fully anticipated, independently verifiable and not under government control, then saving and investment should not fall following the imposition of a capital levy. Nor should the government find it more difficult to raise revenues subsequently, even if its non-recurrence cannot be guaranteed. In practice, however, serious problems stand in the way of implementation. Property owners are sure to delay its adoption and engage in capital flight, reducing the prospective yield and allowing the special circumstances providing the justification for the levy to recede into the past.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 350.

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Date of creation: Nov 1989
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Handle: RePEc:cpr:ceprdp:350

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Keywords: Capital Flight; Capital Taxation; Government Spending;

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References

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  1. Prescott, Edward C., 1977. "Should control theory be used for economic stabilization?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 7(1), pages 13-38, January.
  2. V.V. Chari, 1988. "Time consistency and optimal policy design," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 17-31.
  3. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 783-802, August.
  4. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers, Federal Reserve Bank of Minneapolis 158, Federal Reserve Bank of Minneapolis.
  5. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 2(1), pages 93-107, May.
  6. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
  7. Henry Shavell, 1948. "Postwar Taxation in Japan," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 56, pages 124.
  8. Herschel I. Grossman & John B. Van Huyck, 1985. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," NBER Working Papers 1673, National Bureau of Economic Research, Inc.
  9. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  10. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 383-96, March.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why Wealth Taxes Are Not Enough
    by Kenneth Rogoff in Project Syndicate on 2013-11-04 15:51:59
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Cited by:
  1. Giovannini, A. & Hines, J.R.J., 1990. "Capital Flight And Tax Competition: Are There Viable Solutions To Both Problems?," Papers, Princeton, Woodrow Wilson School - Discussion Paper 51, Princeton, Woodrow Wilson School - Discussion Paper.
  2. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  3. Michael D. Bordo & Pierre-Cyrille Hautcoeur, 2003. "Why didn't France follow the British Stabilization after World War One?," NBER Working Papers 9860, National Bureau of Economic Research, Inc.
  4. Nicolas Marceau & Michael Smart, 2000. "Business Tax Lobbying," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, Université du Québec à Montréal 102, CREFE, Université du Québec à Montréal.
  5. Mario Sarcinelli, 2012. "Euro crisis or public debt crisis? With a remedy for the latter case," PSL Quarterly Review, Economia civile, Economia civile, vol. 65(262), pages 215-236.
  6. Louis Kaplow, 2006. "Capital Levies and Transition to a Consumption Tax," NBER Working Papers 12259, National Bureau of Economic Research, Inc.

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